Friday, May 6, 2016
Saturday, February 23, 2013
Caves to Condos
The United States Real Estate Market Early 2013
New homes is not a robust market. However, the gap between completions and sales is shrinking a little.
The decline in new home sales can be understood in terms of ownership rates and rentals.
Consequentially, many of the "starts" are multi-family.
It should be noted here that US median income is $52000 per household. Historically, houses have sold for 3x median income. The chart below shows the median sales price over time of new homes.
i
Income adjusted, new houses are over 4x median income. The national median existing-home price3 for all housing types in 2012 was $180,800. This multiple is 19% over the historical mean of 3x income. The housing market is being supported by low rates, not pricing.
Additionally, banks and agents are holding back inventory. Inventories have gone from about 4 million in 2008 to 2 million today.
Consequently time on market has dropped with supply from 12 months to 7 months. From the NAR "Total housing inventory at the end of December fell 8.5 percent to 1.82 million existing homes available for sale, which represents a 4.4-month supply 2 at the current sales pace, down from 4.8 months in November, and is the lowest housing supply since May of 2005 when it was 4.3 months, which was near the peak of the housing boom. Year end inventory is 21.6 percent below a year ago when there was a 6.4-month supply. Raw unsold inventory is at the lowest level since January 2001 when there were 1.78 million homes on the market."
The Housing market is not only being artificially stimulated by low rates, but supply constrains as well.
The conclusion from the above data is summarized by Vance Roberts of Street Talk ;
1."The Status Quo {read Fedral Gvt) plan to reflate the housing market with super-low mortgage rates and down payments has worked to some degree.
2.The financial sector’s plan to boost home prices by limiting supply has also worked.
3.ZIRP has created a “crowded trade” in low-risk investments with attractive yields such as corporate bonds, dividend stocks, and real estate, which is being fueled by a self-reinforcing perception that “the bottom is in”"
Perhaps our thoughts can best be summarized by Bob Shiller (Yale professor Robert Shiller: Case/Shiller) who has spent his life studying housing. Below are exerts from a recent interview with Goldman;
Housing, new construction, mortgage rates, CRE, rentals and and,
ultimately, "value" are all hot topics in both cocktail party chatter
and behind the closed doors of the Federal Reserve. Bona fide data and
relevant information regarding real estate is strewn across an obtuse
landscape blurred by "seasonally adjusted" data and skewed by market
manipulation and meddlesome government policies. We at Banshee Holdings
will attempt to "dig down" through the layers of sedimentary data and
present a "concrete" synopsis of U.S. housing markets.
To understand the idiosyncrasies of "real" real estate, the scope of the market itself must be understood. The latest census report estimates there are 350,000,000 people permanently residing in the United States. The 2012 update of the census indicates 135,000,000 housing "units" shelter our population. 85,000,000 of these units are detached free standing structures with multifamily buildings holding about 40,000,000 people and the remaining 10,000,000 in trailers. This is further broken down by 5,000,000 seasonal residences, 18,000,000 units vacant or for rent and 7,000,000 held off market. All in all about 85% of the existing "units" are occupied. Upstream data can be verified here.....http://www.census.gov/#.....66% of these residences are lived in by their owners, the rest are income, vacant or used seasonally. It should be noted our population has a net increase of over 3,000,000 people a year. The aforementioned numbers form the broad basis from which all reliable US real estate data is contrived. As seen, US housing is a large (NAHB data shows housing and home construction is 18% of GDP ), diverse and growing market.
A market, by definition, is where buyers and sellers convene. To understand the RE market and the final exchange of dollars for property, we must look at the forces that affect the market. In real estate these interacting forces are interest rates, inventories, starts, new home completions and, finally, sales. These dynamics affect both the supply and demand side of the exchange.
As everyone understands, interest rates are historically low. Translating this over to housing, according to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was a record low 3.35 percent in December 2012. Though correlation is not causation, the charts below indicate that as borrowing costs have declined, both new and existing home sales have risen. The charts indicate a combined sales total of almost 5,000,000 homes in 2012,
It should be noted, 70% credit creation in the United States begins with home mortgage borrowing. The current ZIRP and MBS buyback (bailout) is not only designed to stimulate the economy through dollar (M2) creation but is aimed squarely at this mortgage credit cycle. Bank debt and risk is being lowered, the cost of money has never been cheaper. As the charts indicate, housing is, and should continue to be, a direct beneficiary of the current fiscal and monetary policies.
Understanding low rates are a tailwind, home sales should be further broken down into permits drawn, starts, completions and sales. The chart below tracks this activity over the last 40 years.
As seen, sales are lagging starts and completions, but the market is optimistic and moving up. It should be noted here that the National Association of Realtors report last month stated "Housing starts surged by 12.1% in December proving that the housing recovery is back." Additional hype reported seasonally adjusted December starts: 954,000 (Up 12.1% from November). From the report:
903,000 permits
954,000 starts
686,000 completions
377,000 sales (as of November)
NAR data is annualized from current month data. The actual numbers last year are:
To understand the idiosyncrasies of "real" real estate, the scope of the market itself must be understood. The latest census report estimates there are 350,000,000 people permanently residing in the United States. The 2012 update of the census indicates 135,000,000 housing "units" shelter our population. 85,000,000 of these units are detached free standing structures with multifamily buildings holding about 40,000,000 people and the remaining 10,000,000 in trailers. This is further broken down by 5,000,000 seasonal residences, 18,000,000 units vacant or for rent and 7,000,000 held off market. All in all about 85% of the existing "units" are occupied. Upstream data can be verified here.....http://www.census.gov/#.....66% of these residences are lived in by their owners, the rest are income, vacant or used seasonally. It should be noted our population has a net increase of over 3,000,000 people a year. The aforementioned numbers form the broad basis from which all reliable US real estate data is contrived. As seen, US housing is a large (NAHB data shows housing and home construction is 18% of GDP ), diverse and growing market.
A market, by definition, is where buyers and sellers convene. To understand the RE market and the final exchange of dollars for property, we must look at the forces that affect the market. In real estate these interacting forces are interest rates, inventories, starts, new home completions and, finally, sales. These dynamics affect both the supply and demand side of the exchange.
As everyone understands, interest rates are historically low. Translating this over to housing, according to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was a record low 3.35 percent in December 2012. Though correlation is not causation, the charts below indicate that as borrowing costs have declined, both new and existing home sales have risen. The charts indicate a combined sales total of almost 5,000,000 homes in 2012,
It should be noted, 70% credit creation in the United States begins with home mortgage borrowing. The current ZIRP and MBS buyback (bailout) is not only designed to stimulate the economy through dollar (M2) creation but is aimed squarely at this mortgage credit cycle. Bank debt and risk is being lowered, the cost of money has never been cheaper. As the charts indicate, housing is, and should continue to be, a direct beneficiary of the current fiscal and monetary policies.
Understanding low rates are a tailwind, home sales should be further broken down into permits drawn, starts, completions and sales. The chart below tracks this activity over the last 40 years.
As seen, sales are lagging starts and completions, but the market is optimistic and moving up. It should be noted here that the National Association of Realtors report last month stated "Housing starts surged by 12.1% in December proving that the housing recovery is back." Additional hype reported seasonally adjusted December starts: 954,000 (Up 12.1% from November). From the report:
903,000 permits
954,000 starts
686,000 completions
377,000 sales (as of November)
NAR data is annualized from current month data. The actual numbers last year are:
804,000 permits
780,000 starts
648000 completions
370,800 sales (as of Dec. 31, 2012)
Two things can be drawn from this comparison. NAR data is purposefully
hyped to entice transaction activity. Permits and starts should be kept
in perspective and are more than double sales. The charts below display
completions and the state of the "new" home market in the U.S.
New homes is not a robust market. However, the gap between completions and sales is shrinking a little.
The decline in new home sales can be understood in terms of ownership rates and rentals.
As seen from the chart below, after climbing to its peak in the mid 1990's, home ownership rates are
declining and rentals are increasing.
Consequentially, many of the "starts" are multi-family.
It should be noted here that US median income is $52000 per household. Historically, houses have sold for 3x median income. The chart below shows the median sales price over time of new homes.
Income adjusted, new houses are over 4x median income. The national median existing-home price3 for all housing types in 2012 was $180,800. This multiple is 19% over the historical mean of 3x income. The housing market is being supported by low rates, not pricing.
Additionally, banks and agents are holding back inventory. Inventories have gone from about 4 million in 2008 to 2 million today.
Consequently time on market has dropped with supply from 12 months to 7 months. From the NAR "Total housing inventory at the end of December fell 8.5 percent to 1.82 million existing homes available for sale, which represents a 4.4-month supply 2 at the current sales pace, down from 4.8 months in November, and is the lowest housing supply since May of 2005 when it was 4.3 months, which was near the peak of the housing boom. Year end inventory is 21.6 percent below a year ago when there was a 6.4-month supply. Raw unsold inventory is at the lowest level since January 2001 when there were 1.78 million homes on the market."
The Housing market is not only being artificially stimulated by low rates, but supply constrains as well.
The conclusion from the above data is summarized by Vance Roberts of Street Talk ;
1."The Status Quo {read Fedral Gvt) plan to reflate the housing market with super-low mortgage rates and down payments has worked to some degree.
2.The financial sector’s plan to boost home prices by limiting supply has also worked.
3.ZIRP has created a “crowded trade” in low-risk investments with attractive yields such as corporate bonds, dividend stocks, and real estate, which is being fueled by a self-reinforcing perception that “the bottom is in”"
At Banshee, we always look for a "bottom line" on which to base our
analysis. The bottom line for US housing is the market is bogus. Low
rates and mortgage buybacks by the federal government coupled with
lenders "holding back" inventory has skewed market forces. Supply has
been held below the recession weakened demand, and prices have begun to
rise pushed by low rates. Consequentially, the market as of February
2013 appears to be stabilizing. But it must be reiterated, this market
is being created by government and bank policies.
Perhaps our thoughts can best be summarized by Bob Shiller (Yale professor Robert Shiller: Case/Shiller) who has spent his life studying housing. Below are exerts from a recent interview with Goldman;
"What’s been driving the improvement in the US housing market over the past six to nine months?
Part of the improvement is just the benefit of the summer season. Summer and early fall have traditionally been periods of increasing home prices. Another factor is the ongoing decline in foreclosures. Foreclosed properties tend to sell at low prices and as the foreclosure rate declines, we might expect to see aggregate home prices increase. I also think that price increases that were likely caused by the decline in foreclosures may have been mistakenly taken by the public as a note of optimism, leading them to react to the thought that home prices might be rising again. Inventories of homes for sale are also low, in part because sellers have been holding off on putting their houses on the market in the hopes of further price increases or because millions of mortgages are still under water so many homeowners feel “stuck” in their homes until/unless prices rise more strongly and they can pay off their mortgage with the proceeds of their sale.
Has the US housing market bottomed?
Maybe, but I still worry about further price declines. There’s no really concrete reason for an upturn now; a recent survey of home buyers didn’t find any sudden change in optimism and there seems to be a souring on the idea of home ownership. That might reverse again as the crisis ends. But I suspect that it’s not easily reversed because the whole idea of proudly owning a home has been tarnished. And now Congress is talking about eliminating the whole mortgage deduction or government support for Fannie and Freddie. These are all clouds on the horizon. That’s why I think home prices may still go down.
And on buying a home now?
People think of housing as a form of investment, but really it’s a consumption good. Houses are built to please you and then they wear out, go out of style, and are expensive to maintain. They have a capital value but capital gains on housing adjusted for inflation over the last century, from 1890 to 1990, was about zero. So housing is not really an investment.
Should every American own a home?
Definitely not. There’s something to be said for
home ownership; it continues to symbolize our detachment from the old
world where landlords lorded over us. That sense of independence is an
important part of our culture and I don’t think it is going away anytime
soon, although it may be diminishing. But the emphasis on the “American
dream” of home ownership was overdone. We were so single-mindedly pursuing home ownership that we allowed our lending practices to deteriorate to a tragic end.
And there are many advantages to renting, which oftentimes allows more
flexibility and more convenience. Renting also allows people to
diversify investments. For many people, buying a home involves tying up
all of their cash into one asset – their home."
Bottom
line.....It is a good time to buy a house from an interest rate
standpoint. Prices are stabilizing here though artificially stimulated.
As an asset class, housing has a high "utility" value. Additionally,
Government support of housing will continue as a majority of credit in
the US originates with housing as collateral. However, as in many
markets today, with government intervention comes increased risk. As is
often said in Real Estate....buyer beware....or at least "aware"....
Thursday, January 19, 2012
........Merry Go Round.............
New years optimism, european headline boredom and confluxing rate environments are driving economic markets worldwide. Baltic dry 924 on January 5, off a cliff since mid Dec and historically low but flat YoY. This index was north of 10,000 in 2008 and reflects Greeks hiding money, low dry rates because of increased ship numbers and economic malaise worldwide. I would expect tanker rates to rise in light of Keystone rejection, however....US rail traffic {Buffet favorite} looks to be falling of late with 274,863 cars out and 31 billion ton/miles of freight, down about 3% YoY.....Copper 8,155 USD a tonne in London, noon spot.... up about 9% in the last couple of weeks, JJC reflecting this pricing and moving from 45 to 49 in the period.....read China demand..need proof...Chinese copper demand up 47% YoY...more?.. latest numbers show Chinese Q4 GDP up 9% and industrial production up 12.8% in 2011....No recession there....Stateside, todays unemployment number of 8.5% showed a decrease in first claims of 50,000 to around 350,000 filling out forms they have never seen before....celebration at the Obama palace because of the headline flash....the smaller print in the report at the BLS shows 7,826,655 were sent benefits this week, up over 500,000 from the week before....Good luck with that debt thing, Black Prince.....As a matter of interest, unemployment in Greece is 20% with GDP contracting over 12% since 2009...British GDP is flatlining...Australia comes in at 5.5% unemployment cause they take shit out of the ground and send it to China down there......Oil at 100 USD a can in Texas this morning...Brent crude is still at a premium and STO is the play.....Gold 1650 USD a troy oz....Gold remains strong up 10% in 2011 and ^ 4% since the ball dropped in Times Square...note the 200 day MA is unwaveringly up against the euro so the trade should be viewed relative to currency ...need more ?..inside sources reflect mainland China imported almost 102.8 metric tons of Gold in November, valued at about $5.4 billion USD...I'm long....Corn stockpiles worldwide are extemely low...Corn sells in Chicago for about 6 USD a bushel....ethanol out, low supply in.....let's see...Kodak is bankrupt...Apple is worth 400 billion USD on the open market.........Housing remains flat stateside and level in China.....tightening working there but loosening not working here....Government data from both countries showing a slight rise in chinese housing inventory with prices off very slightly at .3%.....Stateside, the Feds figure over 7 trillion in home equity has been wiped out and one in five are still "underwater"....spin it any way you like...What am I lookin at?...German short term debt went negative last week...OK, People are willing to take a NEGATIVE return for the safety of a German bond over there....motherfucker, I'm going back to working on my 9 window, 3 dimensional investment matrix...I like US equities, precious metals, copper...Dividend returns will be key again this year with Bloomberg estimating a 12% increase in payouts in 2012...I hold GLTR, GLD, MSTR, TRN, NICE, EMR.....I like JJC and STO..
Wednesday, September 8, 2010
Wed 9/8....Roads and Riches
Money supply desanguinzation, political influences and and debt debacles are the forces driving world markets...BDI 2918, stable and rising after a lean summer...overall shipping rates are near their 10 year reported mean with bribery and "lost" cargo on the rise...US rail traffic also up with over 300000 cars out and 33 billion ton/miles of freight moving..this traffic and volume represents a 6% and 7% increase YoY respectively though still 5% off peak...the CRB is generally a good lead indicator (though liquid weighted) of freight rates and the CRB is strong at 493 with the 200 MA day in a linear uptrend since March..the DBA is showing a corresponding uptrend in the last few months...Copper in London this AM 7519 USD/tonne...up about 14% since the beginning of July...demand driven and strong...Minneapolis wheat was 750 cents a bushel this AM, spiking up on perceived scarcity...Oil 74.5 USD/can today..long is a no brainer here...Nat Gas still cheap with
supply/demand being the driver..the smart money is sniffing nat gas and it smells like huge future potential...Gold is 1257 USD on the spot...safe,strong and heaven hunting for now but driven by perceived safety, not physical need.....USD 82.11 in Dixieland, off about 8% since June...the S&P was 1100 this AM, range bound and flat since June...interestingly, US equities have lost their inverse relationship to the dollar of late...regardless, the big investment houses continue to pump equities neglecting the last 10 years of losses in a self fulfilling delusion of stupidity and clouded rhetoric, collecting fees in glass towers built by the money of people who worked and made something...{P.S, I just left Manhattan where I met with the big Bank and Trust companies best minds and their resulting projections...my fucking dog is capable of more original thinking than the "teams of experts" most people hand over their money over to}..it is no wonder people
would rather invest with the PE guys and independents...Bonds remain strong on low inflation and the perceived safety of debt obligation for the time being..If I were a bond guy, I would be sleeping with my gun under the pillow so I could pull the sell trigger when needed...when bonds sell off, it won't be pretty...Real Estate prices stateside continue to unspool to the bottom with unemployment and debt to wage realizations pulling the anchor down....many RE agents now driving 3 series BMWs, down from 7s....pigs...of note, Chinese RE continues strong despite Government tightening attempts as sheer demand continues to be the driver.....from the Emerald Palace, the Wizard of Oba says roads and bridges and 7 more layers of bureaucracy should solve our woes...I guess Oba and Congress feel that with enough asphalt, paperwork, Government jobs and debt laden entitlements some money should flow down to the masses and reelection chances will increase...so far
the money supply and the economy have not responded to the "print more money" policies but if we buy enough of our own paper, Keynesian theory will prevail....OK, I'll shake it out....Stateside, GDP is essentially negative...Banks want to lend but there are few borrowers ...Unemployment is still 20% plus in the shadows...Fed Reserve quantitative easing continues...RE and CRE are still unwinding...the lawmakers are pushing debt and the resulting inflation induced perceived wealth as policy....Overseas, China economy looks strong but tempered by the state...Europe has one strong economy, achtung, but more debt is hidden behind feigned language barriers and accounting irregularities, be careful...Norway is strong but socialized...India is growing "optimistically" as might be surmised by those that know them...India is difficult to analyze fiscally no matter how many people answer the phones over there...the productive and often resource based economies of
Australia, NZ, the South China Sea countries, some S America and China should remain strongest....Investing?...Hard assets, metals, oil, farms and food, lumber....remember, like water, investments are better the farther upstream you go....make something...that's it from the skunk works....I own gold, the miners, a nat gas well, EMR, STO, MSTR, NICE, AGU, the yuan and some dollars...and some other shit I can't remember....out,W
supply/demand being the driver..the smart money is sniffing nat gas and it smells like huge future potential...Gold is 1257 USD on the spot...safe,strong and heaven hunting for now but driven by perceived safety, not physical need.....USD 82.11 in Dixieland, off about 8% since June...the S&P was 1100 this AM, range bound and flat since June...interestingly, US equities have lost their inverse relationship to the dollar of late...regardless, the big investment houses continue to pump equities neglecting the last 10 years of losses in a self fulfilling delusion of stupidity and clouded rhetoric, collecting fees in glass towers built by the money of people who worked and made something...{P.S, I just left Manhattan where I met with the big Bank and Trust companies best minds and their resulting projections...my fucking dog is capable of more original thinking than the "teams of experts" most people hand over their money over to}..it is no wonder people
would rather invest with the PE guys and independents...Bonds remain strong on low inflation and the perceived safety of debt obligation for the time being..If I were a bond guy, I would be sleeping with my gun under the pillow so I could pull the sell trigger when needed...when bonds sell off, it won't be pretty...Real Estate prices stateside continue to unspool to the bottom with unemployment and debt to wage realizations pulling the anchor down....many RE agents now driving 3 series BMWs, down from 7s....pigs...of note, Chinese RE continues strong despite Government tightening attempts as sheer demand continues to be the driver.....from the Emerald Palace, the Wizard of Oba says roads and bridges and 7 more layers of bureaucracy should solve our woes...I guess Oba and Congress feel that with enough asphalt, paperwork, Government jobs and debt laden entitlements some money should flow down to the masses and reelection chances will increase...so far
the money supply and the economy have not responded to the "print more money" policies but if we buy enough of our own paper, Keynesian theory will prevail....OK, I'll shake it out....Stateside, GDP is essentially negative...Banks want to lend but there are few borrowers ...Unemployment is still 20% plus in the shadows...Fed Reserve quantitative easing continues...RE and CRE are still unwinding...the lawmakers are pushing debt and the resulting inflation induced perceived wealth as policy....Overseas, China economy looks strong but tempered by the state...Europe has one strong economy, achtung, but more debt is hidden behind feigned language barriers and accounting irregularities, be careful...Norway is strong but socialized...India is growing "optimistically" as might be surmised by those that know them...India is difficult to analyze fiscally no matter how many people answer the phones over there...the productive and often resource based economies of
Australia, NZ, the South China Sea countries, some S America and China should remain strongest....Investing?...Hard assets, metals, oil, farms and food, lumber....remember, like water, investments are better the farther upstream you go....make something...that's it from the skunk works....I own gold, the miners, a nat gas well, EMR, STO, MSTR, NICE, AGU, the yuan and some dollars...and some other shit I can't remember....out,W
Wednesday, July 7, 2010
Wed. 7/7...Running on Empty, Running On
De-leveraging, tight credit markets and government economic experiments are the forces driving world markets... BDI 2127, dramatically down 45% in the last 2 months with all shipping rates lower regardless of vessel type or size...I don't invest around the BDI but like it....it is an old London house, it is updated daily and it is a good overlay tool against commodity prices as most metals, grains and raw materials must be moved by ship...As noted last week, the Greeks dictate much of this trade and deception/manipulation is common...BTW, BDI is flat YoY...US rail traffic shows 288,000 freight cars out, rolling 32 billion ton miles of freight, cars and cargo up 11% YoY...no Greeks involved...CRB 471, flat and stable....London copper 6522 USD/tonne, up 200 bucks this week, stable...Oil 73.24 USD for the light/sweet...stable...Gold 1192 USD on the spot at 1000EDT, off this week but that only strengthens it's base...GLD(the ETF) holds 60 billion dollars on paper, returning 14% YTD...S&P
1037 off marginally on the week but down 8% for the year...where's your money?...Inflows continue to US Treasuries with low yields and high coupons being the indicator...safety over return= worldwide economic decay...need more proof, how about VIX 30+...Last weeks unemployment numbers show continued weakness with official unem rate at 9.5%, shadow at 20%...these numbers reflect structural problems stemming from wages sticking above equilibrium, weighty government fees and regulations, a high minimum wage and welfare/government benefits reducing the incentive to work (evergrowing entitlement mentality)...adding to this decay are a mismatch of labor skills to needs...cheered up yet?...Look, we are experiencing a huge deleveraging...the CDO ghost is still around and even with the money spouts marked "Keynes" wide open, many economies (x China, Australia, New Z) are still contracting...high unemployment, declining RE markets and contracting money supply are manifestations of this decay...The
Wizard of Ob and his friend "print more money"
Ben are being snowballed by past and present debt creation and government growth...But remember the Keynesian creed, it is repeated by the Fed every new day, “By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”....for the Wizard and Ben, increasing liquidity, money supply and credit are the keys to Keynesian fulfillment and economic joy....look, for you econ minors, Obama is trying to shift the aggregate demand curve upward on the demand line by adding reserves...his problem is the demand line is flattening so instead of expansion we are witnessing a contracting GDP and no inflation (yet) as the graph would predict...add a "sticky" price and wage environment and, voila, here we are....the solution from DC?...look at the gas gauge, it is showing empty but I'm pretty sure the Emerald Palace and the Fed will just keep driving, inflation is the only way to refill the tank....of note, Saudis are collecting up BP which may stabilize credit swaps..Ideas? I still like currency arbitrage and related trades...we are in the new normal, get used to it...Disclose..I got Gold, oil, the
miners, STO, EMR, MSTR, NICE, a gas well..hard assets rule...Out, W
"Words ought to be a little wild, for they are the assault of thoughts on the unthinking." JMK...I never said he was wrong
1037 off marginally on the week but down 8% for the year...where's your money?...Inflows continue to US Treasuries with low yields and high coupons being the indicator...safety over return= worldwide economic decay...need more proof, how about VIX 30+...Last weeks unemployment numbers show continued weakness with official unem rate at 9.5%, shadow at 20%...these numbers reflect structural problems stemming from wages sticking above equilibrium, weighty government fees and regulations, a high minimum wage and welfare/government benefits reducing the incentive to work (evergrowing entitlement mentality)...adding to this decay are a mismatch of labor skills to needs...cheered up yet?...Look, we are experiencing a huge deleveraging...the CDO ghost is still around and even with the money spouts marked "Keynes" wide open, many economies (x China, Australia, New Z) are still contracting...high unemployment, declining RE markets and contracting money supply are manifestations of this decay...The
Wizard of Ob and his friend "print more money"
Ben are being snowballed by past and present debt creation and government growth...But remember the Keynesian creed, it is repeated by the Fed every new day, “By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”....for the Wizard and Ben, increasing liquidity, money supply and credit are the keys to Keynesian fulfillment and economic joy....look, for you econ minors, Obama is trying to shift the aggregate demand curve upward on the demand line by adding reserves...his problem is the demand line is flattening so instead of expansion we are witnessing a contracting GDP and no inflation (yet) as the graph would predict...add a "sticky" price and wage environment and, voila, here we are....the solution from DC?...look at the gas gauge, it is showing empty but I'm pretty sure the Emerald Palace and the Fed will just keep driving, inflation is the only way to refill the tank....of note, Saudis are collecting up BP which may stabilize credit swaps..Ideas? I still like currency arbitrage and related trades...we are in the new normal, get used to it...Disclose..I got Gold, oil, the
miners, STO, EMR, MSTR, NICE, a gas well..hard assets rule...Out, W
"Words ought to be a little wild, for they are the assault of thoughts on the unthinking." JMK...I never said he was wrong
Wednesday, June 30, 2010
Wednesday. June 30....BEN AND BARACK DO A MONEY RAIN DANCE IN THE ROSE GARDEN
Financial reform farces, Chinese math questions and government debt are the primary influences on world markets this week...the hard drives are mated to the glow box so headline induced volatility algorithms are the money makers of late...the profit is in the swing trades so the big houses will ice the CPUs and play again, believe me.....BDI 2447, shipping rates continue to fall though the CRB remains fairly flat at 465 with oil, grain and metal prices(x steel)off marginally this week but stable exponentially in spite of electronic pulses...the shipping rate declines reflect Greek shippers refusing to speak German and clouding revenues...Copper 6584 USD/tonne in London this AM, dead flat WoW but up 30% YoY...about half of the copper in the world goes to Asia, with the Americas getting 32% and Africa getting 5%...copper consumption is a good indicator of expansion and growth and you figure it out from there...Oil 76+ USD a barrel this AM NY merc...RBOB 2.11 USD July delivery...RBOB linear, rising and strong in the last month with late summer contracts falling but up is the trend and peak oil is the driver...Nat. Gas 4.71 USD/mmBTU...a mmBTU the amount of nrg in 8 gallons of gasoline and equals 27 cubic meters spatially...point is, it's cheap.....USD index closed yesterday at 86.13 up a little in a bumpy week, but safer than euros...Gold 1240 USD/oz flat on the week but uptrend remains embedded...like it or not, gold up is the only decent long trend out there...Consumer Confidence tanked last month in spite of Ben and Barack together in the Rose Garden doing a money rain dance...their behavior is a travesty of the United States constitution...sorry, no politics....Chicago PMI flatting to 59, off 7% but production apparently ramping and a number above 50 indicates growth...remember, this report reflects orders, not payments or fulfillments...S&P 1075 at the open...off 5% in the last week...VIX 34.14, traders hiding under the covers.....FTSE 4900 GMT 9AM...off 5% WoW also...US GDP last week showed +2.7% growth, essentially this number reflects negative transaction growth with +3 being break-even...10 year Treasury below 3% at 2.94...safe parking but a reflection of little market confidence and a reduced risk appetite worldwide...of note, Tesla motors IPO up 40% yesterday, you would have to be a fucking idiot to buy a car company but it proves Goldman Sachs still has the Midas touch....New home sales down 33% in May with refi's being the only boost...lumber index continues to slide....expect no gains in the nationwide RE broad market with the inflated CRE values lurking on bank balance sheets...again, CRE values are simply a cash flow equation and that equation is negative......the RE and CRE cloud is 40% of the US economy and I guess you can get the idea from there....need more?...Job growth is nonexistent a la ADP (+13,000 nationwide)
with government compliance regulations, tax rate increases and an unpredictable future planning environment killing most business incentive and hirings...commercial loan apps reflect this disease...Good News?...yea, the hedge fund guys dodged a bullet and get to keep more of their money which should help the lobster fishermen and wine importers for awhile longer....no sugar coating this week...need some ideas? Currency arbitrage....that's it from the skunkworks.....Disclose...I own Gold, USO, MSTR, NICE, EMR, STO, a nat gas well, some US Dollars, the yuan, the miners and I am buying some apple trees.....out, W
with government compliance regulations, tax rate increases and an unpredictable future planning environment killing most business incentive and hirings...commercial loan apps reflect this disease...Good News?...yea, the hedge fund guys dodged a bullet and get to keep more of their money which should help the lobster fishermen and wine importers for awhile longer....no sugar coating this week...need some ideas? Currency arbitrage....that's it from the skunkworks.....Disclose...I own Gold, USO, MSTR, NICE, EMR, STO, a nat gas well, some US Dollars, the yuan, the miners and I am buying some apple trees.....out, W
Tuesday, June 22, 2010
BARACK AND THE BEAN STALK
Date: Tuesday, June 22, 2010, 1:36 PM
International monetary flows, wealth erosion and credit afflictions continue to be the driving influences on most world markets.... BDI 2694, off...Copper
6315 USD/ton in London this AM, off this week also....
If you want gold, it will cost you 1237 USD a troy oz on the comex...
A similar measure of Caribbean marijuana on the streets of Manhattan is about 330 USD for comparison sake...
S&P 1113 at the open, up marginally in a choppy week...VIX 25, dropping but traders wary...
Europe and Asia were also choppy and marginally up WoW except for the Hang Seng which has traded up 5% this week on yuan float and the associated perception of Chinese {free} market stability...mark your calenders because this restrictive easing from the Chinese government will start a global commodity inflationary cycle which will end at your wallet...
Interestingly, rumor is the Chinese banks are buying dollars..this is simply a hedge play....these guys are smarter than the Harvard guys running DC...
Oil 77.7 USD/barrel on the NY merc this AM, strong and stable this week...US grain futures also strengthening as predicted...United States May CPI out at
the end of last week showed a .2% overall decline...ex food and nrg it was up .1% in May...CPI is up 2% YoY and up 1% less food and nrg YoY...NAR housing numbers out today...showing a May decline of 2.3% in transactions (with 31% being foreclosure resales) and prices off 1.5% YoY but up of late...
expect further decay in RE and CRE...what else?...
Schwarzenegger wants to cut pensions in Cali...the Richmond Fed today said manufacturing was basically flat in the South with a slight uptick in
unemployment...manufacturers reported rising costs of both raw and finished goods, but they expect these costs to remain moderate on light demand....
unemployment...manufacturers reported rising costs of both raw and finished goods, but they expect these costs to remain moderate on light demand....
OK, I'm gunna shake it out for you...Arcane as it may seem, the velocity on money has slowed dramatically since the beginning of 2009...this
abatement in transactions began with the unwinding of the CDO markets and has culminated in the tight credit environment we are experiencing today...
abatement in transactions began with the unwinding of the CDO markets and has culminated in the tight credit environment we are experiencing today...
declining money flow is further evidenced in deflating real estate markets, enhanced high unemployment and restricted inflation...Barack and his Fed
governors know they need to increase the money flow and credit cycles to increase economic prosperity and resulting social contentment... so?, "magic beans?"...Barack, with Ben holding his green watering can, planted the beans of economic expansion with low interest rates and by stuffing the coffers of the reserve banks with free money....
governors know they need to increase the money flow and credit cycles to increase economic prosperity and resulting social contentment... so?, "magic beans?"...Barack, with Ben holding his green watering can, planted the beans of economic expansion with low interest rates and by stuffing the coffers of the reserve banks with free money....
But the beanstalk hasn't grown...late MIT prof Paul Samuelson was right this time ” You can force money on the system in exchange for government bonds, its close money substitute; but you can’t make the money circulate against new goods and new jobs." ...Banks aren't lending , people do not want to borrow or spend, governments are broke, the velocity of money is declining...
Where to?...in the fairy tale, Jack stole the gold, faced and killed the giant, kept some riches but could never wash the blood of the giant off his hands...Barack, like Jack, is facing the giant, the giant of economic expansion...but Barack's beans haven't grown even though Ben has been pouring money out...don't worry Barack has now planted the seeds he got from Keynes...with enough debt and spending, this seed will definitely grow...or should I say inflate until everyone is fooled by apparent
wealth and content....But like Jack, Barack will never be able to wash his hands of the...debt.....STFW....OK? ideas...use the leveraged ETFs short...most the ETFs are trading like stock, do not reflect the contracts and are bullshit....Gold,though definitely a fear/stability play, should be held until it stops working...it has room to run...As always, oil...hard assets....make something or grow food....that's it from the skunk works....Disclose;I own STO,USO, nat gas, yuans, MSTR, NICE, EMR, gold and the miners...I might buy the spider...or a place in France....W
wealth and content....But like Jack, Barack will never be able to wash his hands of the...debt.....STFW....OK? ideas...use the leveraged ETFs short...most the ETFs are trading like stock, do not reflect the contracts and are bullshit....Gold,though definitely a fear/stability play, should be held until it stops working...it has room to run...As always, oil...hard assets....make something or grow food....that's it from the skunk works....Disclose;I own STO,USO, nat gas, yuans, MSTR, NICE, EMR, gold and the miners...I might buy the spider...or a place in France....W
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